By Fergal Smith
TORONTO – The Canadian dollar strengthened against the greenback on Wednesday as worries about a possible recession eased following encouraging economic data from the United States, Canada’s largest trading partner, offsetting a slide in oil prices.
Wall Street rallied as data showed that the U.S. services sector rebounded unexpectedly in July and orders for U.S.-manufactured goods increased solidly in June.
“The economic data broadly came in higher than expected as the service part of the economy seems to be stabilizing and price pressures are improving,” Edward Moya, a senior market analyst at OANDA in New York, said in a note.
Canada sends about 75% of its exports to the United States, including oil.
U.S. crude oil futures settled nearly 4% lower at $90.66 a barrel after U.S. data showed crude and gasoline stockpiles unexpectedly surged last week and as OPEC+ said it would raise its oil output target by 100,000 barrels per day.
The Canadian dollar gained 0.3% to 1.2838 per greenback, or 77.89 U.S. cents, after trading in a range of 1.2833 to 1.2891.
Canadian trade data for June is due on Thursday and the July employment report is set for Friday, which could offer clues on the strength of the domestic economy.
Money markets expect the Bank of Canada to hike its benchmark interest rate by a further 50 basis points next month to a level of 3%. That is the top of the so-called neutral range at which monetary policy neither stimulates nor weighs on the economy.
Canadian government bond yields were higher across much of a deeply inverted curve. The 2-year rose 10.8 basis points to 3.218%, while the 10-year was up 1 basis point at 2.719%.
(Reporting by Fergal Smith; Editing by Bernadette Baum and Alistair Bell)
